McEwen Inc (MUX) 2021 Q4 法說會逐字稿

Hello, ladies and gentlemen. Welcome to McEwen Mining's Q4 and Year-end 2021 Operating and Financial Results Conference Call. Present from the company today are Rob McEwen, Chairman and Chief Owner; Segun Odunuga, VP, Corporate Controller, and Interim CFO; Peter Mah, Chief Operating Officer; Michael Meding, Vice President, Andes Corporation Minera SA; and Stephen McGibbon, Executive Vice President of Exploration.

After the speakers' presentation, there will be a question-and-answer session. (Operator Instructions) I'll now turn the call over to Mr. Rob McEwen, Chief Owner. Please go ahead, sir.

Thank you, operator, and hello and welcome to fellow shareholders and investors. As you know, we've been working to turn our fortunes around. Today, we're going to discuss the progress that we made in 2021 and provide our outlook for this year. In 2021, we had a number of notable steps of improvement. We increased our production, lowered the cost per ounce and our operations delivered positive exploration results, along with a preliminary economic assessment for our Fox Complex, showing that there is a 10-year life in front of us there, and we created McEwen copper to fund the advancement of our losses in this copper project.

Today on the call, a number of our officers will be talking about 2021 results and looking forward into this year. And we're going to start with Segun Odunuga. You're up, Segun.

Thank you, Rob. Good day, everyone. Our financial performance continued to improve our Gold Bar and Fox Complex mines in 2021 after a 2020 mark by the beginning of the COVID-19 pandemic, although most significantly impacted by COVID-19, our operations at [some states] managed to generate $10 million in (inaudible) to McEwen Mining 2019 during 2021. Our liquid asset at the end of the year, which includes cash and cash equivalents of $54.3 million of -- including restructure cash of $6.3 million, investments in short-term investment -- investment in short-term cash should be a cash equivalent of around $1.8 million and precious metal inventory of $163.9 million as updated of 2021.

In 2021, we complete 3 financial transactions, which included a $4 million [product] replacement for the advancement of Los Azules project. At the Fox Complex here in Ontario in Canada, resumed commercial production during 2021 ahead of schedule. We are expecting that demand will continue to deliver as planned during 2022. Also to -- in 2022, we are -- primarily we continue to manage our operating margin by being capital expenditures, materials contracts, improving to our management systems and also bringing synergies from our procurement -- of procuring between operations. So structured as we all are now what we're starting in the global arena right now. We started the year with a very high [diesel] cost, which already impacting our cash cost per house of $25,000. We except to see offset with the increase in gold price realized at current gold price average in 1900. This is something that we are expecting that we impact -- will be a positive impact to -- even though the diesel price is increasing, but we say, offset with the gold price. We'll be investing in Los Azules during 2022 to advance the project to feasibility stage. This study will be accounted in our e-com segment as expect. So we expect to see our income statement in Q1 to be impacted by expanding that we are bringing out at loaders. [Sustaining] to the year end at March 5, we released $15.1 million through a flow-through financing that will be used exclusively for our qualifying Canadian exploration expedition on building on the [PSK apply EPA] for the FOX Compress. And these are all the key proteins that we'll be working towards in 2022. I will now turn the call to Peter for operations.

I'm not sure if Peter's on the call right now. He's in transit from the airport.

I will just join, Rob and everybody. Thank you.

Thanks. Welcome.

Thank you, Rob. Thank you Segun. The 3 highlights for 2021 were improved production, lowering costs and advancing our pipeline of growth projects. I'll just take a moment to go through some of those highlights. For Q4 2021, consolidated production was 31,300 gold ounces and 683,000 silver ounces for 4,150 GEOs or 33% higher than Q4 2020. Our consolidated production for 2021 was 154,410 GEOs above the midpoint of our guidance for the year and about 34% higher than 2020. Production costs per ounce for '21 decrease compared to in 2020, an additional reduction remains for the focus for this year. Cash cost per GEO sold for [central] mines in 2021 were 14.53, representing an 18% decrease over last year and all-in sustaining costs were $16.35 or 21% below 2020. For 2020, we are forecasting production between 153,000 to 172,000 GEOs -- shift into each region quickly here, Fox Complex production from Froome in Q4 2021 was 9460 GEOs, 18% higher compared to the mining out a black box in 2020. Fox Complex production 2021 was 30,060 GEOs or 23% higher than production 2020 production guidance in 2022 at the Complex based on a full year production for Froome were fully into the production in commercial past commercial and full production there, we'll be ramping up to around 44,000 to 49,000 GEO, 2021 cash cost balance [deal] were 11 and 1461 or 1.5% down from the same period last year.

For 2022, we'll just keep continuing those downward trend efforts and working them improved efficiency as we advance our Froome project. We also came up with fast PEA -- it adds another 8,800 ounces of gold. So again, growing our scale, helping spread out our fixed costs that will add on after the room is completed. We have about another 2.5 years from last we added, the year resources in 2021. The IRR on that project is 21%, and it's got some nice low-cost ounces, cash costs, be it $770 and all-in sustaining being around (inaudible) Exploration continues through 2022. Steve so we'll touch on that more a bit later. Gold Bar in Nevada, our production for Q4 2021 was 9950 GEOs or 66% higher compared to Q4 2020, operations in Nevada produced 43,850 deals for (inaudible) representing 57% increase over 2020. The improved production was mainly due to improved (inaudible) operating efficiencies and lesser material impact or sorry, no material impact on COVID-19, no suspension of operations.

2021 cash cost and all sustaining per GEO for Gold Bar were 1687 and (inaudible) in 2020. Production guidance for Gold Bar in 2022 is 38,000 to 44,000 GEO. We'll continue addressing reduced [losses] and costs in 2022. We anticipate placing more ROM on the leach pad, which will reduce our lifting and agglomeration costs and increasing the ROM placement to about 80% from a historical 50%. Other highlights, we've changed mining contractors to a new fixed unit rate contract, and that's proving able to help lower cost compared to last year. San Jose, moving south to Argentina, our 49% interest. San Jose contributable production for Q4 2021 was 20,200 GEOs, 38% higher than Q4 2020 as well as for the full year (inaudible) compared to 2020. Gold and silver production increased due to lessening COVID restrictions that impacted the operations in 2020. That's it. And I'll now turn over the presentation to Steve, who will talk about our exploration plans and results.

Thank you, Peter, and good afternoon, everyone. During 2021, we invested $20.9 million in exploration at Fox Complex in Nevada and delivered solid results in 3 important projects, those being increasing the mine life at room, completing our initial resource estimate at Stock West and completed initial assessments of Tonkin Rooster and Atlas in Nevada. We remain focused on our principal goal in 2022 of one, cost effectively discovering and extending gold deposits adjacent to our existing operations; two, drill testing very attractive exploration targets at stock; and three, seeking to expand from still further to depth and in other areas.

During 2021, we completed over 250,000 feet or 77,000 meters of drilling focused on stock and Grey Fox properties. 2021 delineation drilling at Froome has expanded the deposit further to the west. The best 2021 results from drilling was a 20-meter true with Interceptor 7.43 grams per tonne gold in hole 200F08514. 2022, diamond drilling will focus on extending [Kron's] mine life through resource expansion at depth. In 2021, 24,300 GEOs were produced from Froome. And as of year-end 2021 indicated resource additions at Froome and Grey Fox of some 317,000 ounces had a discovery cost of less than $55 per ounce. And in addition, we released an initial resource estimate of stock rest that includes 144,000 ounces indicated and 111,000 ounces of incurred material. The stock exploration area is adjacent to our stock mill, which currently processes or front [Froome]. Drilling plans for 2022 will follow up on the 2021 drilling [recept] into S21 202, which encountered 21 meters true width of 4.29 gram per tonne material at Stock West and Main. If this intercept connects the mineralization at Stock West, it will materially enlarge the boundaries of the Stock West mineralization system. Visible growth has been noted in several drills from our exploration on stock main and the historic stock mine. -- Shallow drill intercepts include 9.1 meters of 7.43 grams per tonne gold, including 2.6 meters of more than 23 grams per tonne gold within 25 meters of surface from both SM-21-024. The exploration budget for 2022 at FOX is about $10 million.

Now at Gold Bar, in 2021, we completed 17,500 or 5,300 meters of drilling, which included some 8,620 feet, 2,630 meters of metallurgical, geotechnical and drilling programs at Ridge and Tonkin Rooster. Delineation programs were conducted at Atlas Pit, Southwest Pick extension and [Cabin North]. The Gold Bar exploration budget for 2022 is $2.5 million, and we'll be targeting replacement of mining depletion and growth of mineral resources and reserves. Modeling of delineation drilling at Cabin North and at Southwest Pick extension is ongoing. And we will focus on near-mine exploration that can offset [modification] and grow mineral resources over time. San Jose, our 49% interest in Argentina, the San Jose mine, [Cuan Mining] is funding a pro rata portion of a $3.5 million exploration program for 2022. The San Jose property surrounds Newmont's Cerro Negro mine and is host to high-grade epithermal gold and silver deposits. Important areas of exploration in 2021 were San Jose and (inaudible) located in the center of the property. Exploration drilling in the mine area at San Jose returned several encouraging results, including 6.3 meters of 44.4 grams per tonne gold in the Betania vein, 1.9 meters of 14.5 grams per ton and 342 pounds per tonne silver in MENA vein and 4.3 meters of 14.9 grams per tonne gold and nearly 1,400 grams per tonne silver in the Emilia vein. (inaudible) is a new, really acquired property, 70 kilometers south of San Jose. It represents a bulk mineralization target, 6 initial holes and 1,800 meters of planned drilling for 2022 is to demonstrate continuity of high-grade solar results that have been recognized on surface. This concludes the exploration portion of the presentation, and I will pass that back to Rob.

Thank you, Steve. I'd like to now introduce the newest member, our team, Michael Meding. He is looking after our McEwen Copper. He has spent 7 years working for Barrick in San Juan province, Argentina, both at Veladero, Mine and Pascua-Lama. We can say he has extensive experience in San Juan. He lived there for 7 years and 2 of his 3 daughters were born there. So he has strong connections they're politically and commercially. So we just returned from a trip down to the Los Azules property, and I'll ask Michael to speak about that. Michael?

Thank you so much, Rob. As Rob said, the senior management just came back from San Juan, Argentina. There, we visited our Los Azules properties and had the opportunity to meet key stakeholders, including San Juan Governor, Saturnino; Minister of Mines, Carlos Astudillo; (inaudible) who are all positive about our project and wants it's to advance as quickly as possible. We visited the site and also had the opportunity to drive a new access road that we are currently developing that is significantly lower than our current exploration road. -- which will almost allow for year-round access to the site and should help us to develop the properties quicker. We also had the opportunity to see our drill program advancing. And this is an exciting opportunity as we have heard by all stakeholders that we met during that visit.

Very good. Thank you, Michael. Before starting question to answer, I want to make a couple of comments. For those of you unfamiliar with the term GEO which you heard. It's not that we're employing a lot more geologists, but the GEOs are Gold Equivalent Ounces. And in that is converting the silver ounces that come out of our operations in Argentina and some in Nevada are converted to a gold equivalent, and that's what is referred to as GEOs. Michael just mentioned the new access road we're looking at is lower. That's lower elevation, and it lacks the high -- our current root in there as 2 high mountain passes that we have to pass that are prone to getting closed because of snow loads, and this new route is quite an important development for that project. I want to say that looking forward, our production for 2022, we expected the trend of lowering cost per ounce to continue, and there will be a slight increase in production, but I want to alert everybody to the fact that in the first quarter, we're going to experience higher cost. COVID and was a large contributor to that, but it's contributed to a lot of companies having higher costs. But we -- there was higher cost, both in Timmins and in Nevada. So Q1 there'll be a hiccup and cost are projected to be lower going forward for the balance of the year.

There are a number of questions that have been asked and I wanted to speak to them before opening up for further questions. Our cash guidance was given by Peter just now, Segun for the year. There is the commodity prices, there was some sensitivity given by Segun on oil and the offset of a higher gold price. A big issue is we're trading below $1 and the New York Stock Exchange, as many as you know, has given us notice that they don't like stocks below $1. And if within the 6 months of period, it isn't trading above $1, then you face 2 decisions. One to accept delisting or you go and think about consolidation. We had some experience with this before. And each time we've entered into this danger zone, we've been able to escape it and think that we will be able to do that again. There are a number of reasons for that. One, the exploration that Steve spoke about, we believe it will allow us to reduce the payback period in the preliminary economic assessment for the Fox Complex, which would be quite positive because that is projected to be a 9-year mine life as we know it. We had annual production of about 80,000 ounces a year or almost 60% higher than what we're currently doing and with significant from lower cost, but it's important to get the payback down.

Two, we'll be coming out later this year with our progress at Los Azoles, where we'll be updating the preliminary economic assessment. We've been looking at the project going through a number of simulations, optimization simulations and believe there is a larger deposit there and a more profitable deposit using a $3 copper price and copper is now above $4.5, so 50% higher. We decided to the best way to develop this project or to fund the development of Los Azoles was to put it into a separate company and some people have questioned that decision, it was largely driven by a desire not to issue a lot of shares in McEwen Mining to fund it that -- and it was also so we wanted to reduce the potential for significant dilution in order that would be required to fund the project within McEwen Mining, but also there is a very distinct preference by most investors for specific plays like the pure copper play or a pure precious metal play. And that's why we put it out. The question relating to McEwen Copper is when do we expect to close the $60 million to $80 million financing we announced last year, and we hope to conclude that we expect to conclude that in the first quarter of this year.

Still relevant to the Q1 mining and McEwen Copper, with this financing that we expect to close by the end of the first quarter, McEwen would have a 69% interest in the McEwen Copper. There's been some people asking, well, what would the percentage ownership be following the IPO, the IPO is still some time away, but I do believe that Los Azules represents a very valuable asset for us that we will enhance its value in its form as a separate company, and it would appear very attractive to copper investors. As you heard earlier on or may have the Canadian Mining Journal ranked it as the tenth -- or the ninth largest undeveloped copper deposits in the world. We also McEwen mining level, we had $50 million of debt that we were to start the retirement of it in August of this year. We will be moving that. We expect to have that pushed out by year, taking that need off our balance sheet. And there is also some people are saying, why hasn't management been buying on their long blackout periods that we have to observe when we're releasing financials for any significant news of the company, such as the preliminary economic assessment. So that's largely been why people haven't been adding to their positions.

In terms of profitability, you should know that since McEwen Copper will be a subsidiary of McEwen Mining and McKean Mining being a large shareholder, the money we spend at Los Azules, a large portion of it will be reflected on our income statement as an expense. So the question of profitability will be up in the air for quite a while as we're spending money there. Operationally, our mines are generating positive cash flow. And with that, I'd like to open it up for questions and answers. Thank you.

No problem. (Operator Instructions) Your first question comes from the line of Jacob Sekelsky with Alliance Global Partners.

I think you've mentioned that cost guidance was given on the call, I might have missed it, my apologies for that. Would you mind just walking us through that again?

Sure. First-quarter is going to be quite expensive. I'll do it on a consolidated basis first. Cash of $1,900, all-in sustaining of $2450. Second quarter, $1,400 cash, $1850 all-in sustaining, third quarter $1230 and $1,550. And in the fourth quarter, $1, 200 and $1350 all -in sustaining. It was COVID and weather that affected both Black Fox and Gold Bar during the first quarter, and that caused that bump up and a problem in the mail with a piece of equipment, also at Black Fox. But you can see the trend aside from that ugly bumps in the first quarter is progressively lower.

Yes. No, that's helpful. And it's good to see the trend in the second half. Okay. And then just quickly at Gold Bar. You mentioned in the release, potentially bringing on the Gold Bar South satellite deposit in the second half of the year. Any color on development costs that you expect to incur there during the first quarter to kind of bring that comment the mine plan?

I'll ask Peter to shed some light on that.

Yes, thanks, Rob. Yes, Gold Bar, the CapEx for the year is around $10 million. We're expecting to be able to bring that project on in the second half of this year. So we moved it forward from the feasibility spend, if you will. Most of that tended to expand the heap leach pad, build the gold bar south road and construction and (inaudible) credit...

Your next question comes from the line of Joseph Reagor with ROTH Capital Partners.

So you mentioned weather impacting Q1 like Gold Bar. But looking back to Q4, the grade was quite a bit below the first 3 quarters. Was that planned? Or was that something where the resource didn't match expectations?

Peter? -- please?

Yes. In Q4, we changed out the mining contractor and transition to lead core and [unit rate]. So we didn't quite get the [script] we had hoped for. And the order of -- so things have gone well now. The contractors fully transitioned. And we expect to get back on track this year.

Okay. And then looking at the guide for this year, particularly at Gold Bar, I think when we've talked about this maybe even over a year ago, there was kind of an expectation that sometime around 2022, 2023 there will be an uptick in grade as you guys completed some pre-stripping activities and back to a higher grade part of the resource. Has that been pushed out? Is it just not as high as maybe we had anticipated? Any additional color you can give there as far as like going forward expectations on grade?

Yes. I'm not sure what time frame you're referring to. But the -- so we're still in Pick West -- and obviously, that mining has extended out longer than the feasibility by adding in some other [card] opportunity or as we call it. So we've been mining some waste for -- and this year, we continue to do that. The higher grades will actually come with Gold Bar south in the mine plan, and we're advancing that ahead of the feasibility quicker into the first half of the year and the permit is progressing well. We're expecting approvals in the next month. I would caveat though that although the Gold Bar South grade is expected to be higher, the recoveries are slightly lower.

Okay. And then looking at MSC, I realize guidance there is provided by your partner. But there was a pretty decent jump in both cash costs and on sustaining costs in Q4. What do you guys attribute that to? And do we expect that to continue into 2022?

A large part of that cost came from COVID. The mine was largely evacuated for a period of several weeks. There were a number of people that were infected with COVID and they came in and we shut down the mine. We didn't have the production (inaudible) just had the expenses.

The San Hose [did add] were tallied up to be, I believe, $11.4 million in 2020. So significant pandemic costs and delays as Rob mentioned.

And there were issues in Q1 so far?

They started opening their borders, we heard we've gone down. So it's improving. I guess stay guarded. We didn't see the Omicron going, but things seem to be getting back to normal when we were there.

Your next question comes from the line of Heiko Ihle with H.C. Wainwright.

Maybe we should move to the next question. No?

Okay. We'll move on to the next question. Your next question is from John Tumazos with John Tumazos Very Independent Research.

How are things?

Well, we got back down to a lower altitude. It's -- and I don't -- I'm not looking this far now when it's Argentina sea for long distances and down in the city, your vision isn't quite as far.

So with all these great metals prices, maybe there's a shot of selling El Gallo or the 49% of Minera San Jose or eventually McEwen Copper. Do you have enough confidence to borrow $25 million maybe buy 25 million shares. If you were to sell Minera San Jose, the proceeds would be a lot more than that, for example, even El Gallo might be that much or more -- and that might also address your NYSE issues, too. Yes. Yes. We have been devouring to move some of our assets. We just haven't been able to conclude a transaction on that. But definitely, that would be -- I think high in list would be reducing the debt or eliminating it. And with the extra fund was using it in some of the areas you suggested there. I can ask a second question. Looking at the MD&A, beginning around Page 5, it mentions reserves at San Jose. I'm looking at the resources for Ontario that were about the same as the end of 2020, but more at Grey Fox and stock west and less at Fuller and what you call others or other than the first 5 zones. Could you explain the progress where the Ontario reserves, resources -- excuse me, stayed the same -- and the documentation that Peter, Steve and the team need to do to classify reserves at your 100% projects. And I'm assuming that the absence of much gross profit or net profit in current periods is not relevant because if you doubled Ontario production, the cost would fall and the results would improve as more tons and grade more zones. But correct me if that impression is wrong and the current results have an impact. I'm just trying to understand the reserve and resource accounts better.

Sure. I'll ask Peter and Steve to weigh in on that question.

Steve, do you want to go first on resource or I can lead out?

Yes, go ahead, Peter.

Yes. Thanks, John. A lot of moving pieces there in Ontario. As I mentioned, Froome, we mined a year and we kept drilling with MinEx and added a year's resource, which really is in our mine plan. So it added to our mine planning inventory. So we stayed flat there on a resource reserve basis by mining a year out and by adding another year. So very positive.

We're looking to try to do the same this year, maybe slightly less, maybe 30,000 - 40,000 ounces targeted to add at Froome. Grey Fox went up with some drilling around there. More focus was on Stock West and we came out with the maiden resource of about 250,000 ounces and about 185,000 if my memory is correct, was in the mine plan, which made the PEA. So although it might seem that some of the PEA resources decreased, they're there. They just need more drilling and what we've added in with what we believe were the more sure mine plan constrained ounces into the PEA. So that's why there's a bit of difference between PEA mine planning and the financial model you see in there and the resource numbers and why we decided to raise some more flow-through funds to both unlock Grey Fox and Froome.

Fuller, a full look hadn't been done unintended in the past. And so when we started putting mining shapes on that, again, for the same reason we saw some of the drilling areas would require more drilling. So that might be part of the reason for some of the reductions you saw at Fuller. That's really all I have there. Steve, over to you.

Maybe, Peter, what I'll add to that, for our 2022 plan, as I had mentioned, we believe there's still an opportunity to increase further the resources at Froome, and most notably from our drilling at the bottom of the deposit. Also, our new surface drilling at Stock West, we believe there is an opportunity to ultimately improve the payback period that was in the PEA, and that would come by adding some additional ounces near surface proximal to the stock mine. There's further delineation to be undertaken at stock left over time and from an exploration standpoint. While it may not show up in resources this year, any success we have following up the 4.3 gram per tonne interceptor with 21 meters is going to certainly signal probably a meaningful increase in the reserves over time a little further at depth.

And at San Jose, what I can at least best speak to now is the new property [estate], south of San Jose Proper, that has been on surface, that is a very attractive bulk mineralization opportunity, and that's really the focus of a good portion of the exploration program there this year.

Steve and Peter, if I could ask a little more. There's 235,000 measure indicated inferred ounces called Others. And I think that might be Black Fox or Stock Central or Buffalo Ankerite or Davidson Tisdale. Do any of those 4 projects have [zilch]? And could you tell us kind of which one is the biggest one in others?

Steve, Peter?

Yes. I would say the biggest one in the other category would likely be Stock East, which was around 95,000.

Stock East is broken out, Stephen. I'm mentioning Stock Central.

I'd have to go back and kind of do a tabulation on that, John. And certainly, I could report that back to you.

In ancient times, before Stephen, before Peter, when Lexam VG Gold stood alone or was brought into the McEwen Mining, my recollection is that there are 3 deposits for Davidson Tisdale, and Buffalo Ankerite were much larger resources. I'm assuming the drilling wasn't -- was too widely spaced and the current QPs and management just interpret the resources smaller, pending more infill drilling. Is that fair?

That'd be a fair statement.

Your next question is from the line of Heiko Ihle with H.C. Wainwright.

Can you guys hear me okay?

Now, we can, yes.

Not sure what happened earlier. My phones been working all day. Rob, most of my questions have been answered, but geopolitical risks are all over the news right now. I mean, for obvious reason. In your conversations with investors or potential business partners, do you feel you're getting enough credit for the geopolitically safe jurisdiction data assets have? I mean I'm thinking of Russian oil versus non-Russian oil. I'm thinking about North American sourced uranium versus every other source of uranium. Do investors think you can project for that? And if no, what can the analyst community and your company do to maybe lead up to that?

I don't think political risk has come into the consideration for Canadian and American assets. There was questions and it remains about Mexico, but Mexico is a small, small part of our portfolio today. And Argentina has dominated the area of concern, I'd say, about our assets. With the recent development in Chile and Peru in terms of the political leaning of the parties elected and the amount of copper produced by those nations, there's been a decided shift to Argentina. And it's looking better, but I think they have to do a better job of convincing investors. It's a good place. But we have Glencore talking about it, developing their El Pachon mine that's close to Los Azules. You have Fortescue making a very large statement about working to develop the hydrogen green energy of Argentina. They're also exploring near us. Lundin working to develop a copper mine in the same province.

So I think you need to see more of that, and you're seeing some good copper drill holes that I'd say Argentina is better than the Congo…

I would concur.

Go ahead. Sorry.

I said I would concur and so it's probably just about everybody else.

I guess right now, the political conflicts are just illustrating the short supply of metals in face of the demand profiles that are being constructed.

So I guess I agree with everything of what you said, but probably to understand a little bit more. I mean, do you think that investors give you -- I mean, most of your assets are in places where you could walk alone at night and be just fun. And do you think you get enough credit for them in that space already in the marketplace? And if no, how do you think we might be able to achieve them?

As I said, I don't think there's any concern about the location of our Canadian and American assets. There's more concern about the operation results coming out of them. And then Argentina, I think people -- Argentina should do a better job and we should be doing a better job of just highlighting the types of capital investments moving into the country, but Argentina needs to be changing a few of the rules to make it look like an even more attractive time. So I would say the Argentinian asset is receiving the largest discount.

Got it. And then just a quick clarification. In your other model, what figure do you guys see the dollar inflation for the remainder of the year? And I assume all of that is baked into the guidance. Correct?

Salary inflation across the board?

Yes.

I'll have to ask Segun and Peter for that one.

I didn't take the question.

It was just about what inflation factor did we factor into compensation levels for this year.

I think we were at around in Nevada -- and Segun, do you have the exact numbers?

Yes. Nevada, like our U.S. operation, we are talking in 4.5% inflation rate. And at our Canadian operations, we factor in 3.5% inflation rate.

Your next question comes from the line of [Ronnie], who is an investor.

Rob, I've been a long-term shareholder, and I was on McEwen share for 5 years ago in March. It was trading at $4 a share and gold was trading at between $1,200 and $1,300 an ounce. Fast forward today, we're less than $0.90 a share and gold's trading for $2,000 an ounce, which is very, very disappointing. I'd like for you to give me some color on that. And my next -- my question is, if you cannot improve your cash flow and profitability in the near future, would you be willing to sell the whole company to a larger miner?

Well, if you had bid, you'd look at it, right?

Right.

I'd have to say, we encountered some natural problems that were unanticipated and we experienced some serious operational issues. Yes, I share your disappointment in a very large way. I think we have some interesting assets, in particular, it might sound different, because you bought it as a precious metal company, but we happen to have a very large copper resource that makes every other assets look very small right now. And I don't think that's getting value. But as we -- in the past 2 years, you've seen copper more than double. And recently, we've seen a lot of other commodities trying to do the same thing. And it is a very big size. So we're trying to bring the cost down. We're going along nicely. And then a couple of operational missteps, exits that happened that shouldn't have. But that's water under the bridge right now. I feel pretty confident we're going to rebuild that, but it's testing everyone's patience.

To get copper going, I put in $40 million. My total investment in the company is now $200 million. And trading at about half the value I pay, not happy about that at all. And we're working to resolve that, and we spoke about the cost to the bump in the first quarter, but we're heading down and the margins will be increasing, hopefully.

Yes. I guess the share prices, what really I'm looking at when a lot of the other miners, they got double, tripled in the last 4 years, and here we are 75% less in price.

We went the wrong way. Well, I think better times are coming. I see them. But it's been hard on everyone. I don't have anything further to add to that.

Your next question comes from the line of [Bill Powers], who is a private investor.

Just a quick question on, I guess, the cost going and forward. What is going to be -- is it the big drop into Q3 versus a slight uptick into Q4 or about a 20% uptick in Q4. What is the kind of the surrounding factors for that?

Improved production at Froome in terms of number of ounces and getting through some of the large waste removal at Gold Bar.

Okay. And how quickly could we see a decision? I know improved metals prices at Stock West, I know we're at going forward there. I know you're actively drilling. What is the -- I guess, do you need another 6 months, another year? Could you give us some idea on what the time frame is looking like on that front?

We're exploring and very encouraged by what's going on at Stock Mine. We put out our initial for a preliminary economic assessment and it projected a 9-year life average production of 80,000 ounces a year, which would be about 60% higher than what we're projecting for this year. It's, however, had a payback period that was not attractive, so that's about 6 years. I think we're using 1,750 on it. So at a higher gold price, it would be a shorter period. But we expect that the exploration work we're doing will expand the resource base and have a positive impact on the payback period.

I mean I guess the question is, you have near surface material at Stock and at Stock West. As far as looking for ways to bring that forward, is that something -- I guess, how much more before -- I know it's been up to 2 years before you would go forward with a decision on construction there. I guess, is there a way to do a smaller initial investment to get -- those to me would seem to be pretty profitable ounces given the proximity to the mill as well as not having a royalty on it.

Yes, that's true. That's true. Peter, would you like to give a little more flavor there?

Yes, absolutely. Yes, we're very encouraged and very astute question. I think that's an exciting project. We have enough resources you see in the PEA, they go after it now. What Rob and Steve have been talking about is drilling up higher in and around the old workings. And the host unit that Stock left is in the footwall of Stock Main, the historical working. So we're busy drilling around the old workings and around -- near and around the new Stock West ramp to try and find around 100,000 ounces in the upper part of the mine that we could easily access and start mining well to develop the ramp all the way down to Stock West. So that's the strategy.

Drilling has been encouraging. As Rob said, we're very excited about that. We've started preparing the baseline work and the work to submit a permit application. So things work out in the drilling. And on the back of that, we see that resulting in much less dilution of the shareholders. It's about a year to get down to the top of Stock West, and about a $10 million estimate on the CapEx to do that. So it's something we could do quickly, and we're working on and hoping to bring something in the second half of this year for a decision for maybe next steps and further advancements.

Okay. Now that sounds M&A. That's -- I mean with prices, I think your base case was $650 at today, plus or minus $2,000 and a way to move that forward would be, I think, very welcome to buy pretty much all shareholders just given it's -- the impact it could have in moving things forward. I guess the other thing I'm blasting is Mexico. I saw that you put out a little news on that. Is that something that is in the cards as far as selling or potentially developing? I know there is a fairly -- there are some options that involve relatively low initial capital. Is that something that you guys are looking -- actively looking at right now?

Yes. Thanks, Rob. Absolutely. We're looking at each of those strategic options. There are still some folks in the data room looking at purchasing the asset. We haven't remained idle ourselves on other options. We've identified a low capital option for about $29 million for Phase 1. Segun and Stephen and team have been coordinating with Asahi on a potential gold loan option to finance and build Phase 1. The permitting has been advancing as you may all know, the in-pit tailings is all those permitted, but we've also been advancing the power permits for compressed natural gas.

So we have the team there. We have 2 potential mills that we could achieve that low CapEx cost forward and we're working on getting quotations for those mills and the final detailed engineering designs and all the steps that go with that. That would be something like a 12- to 18-month construction period from the time we take the decision to hit the go button.

So with the price of gold at these levels, if you look at the robust upside case, if you will, in the feasibility, it's quite attractive. I think payback at around the $1,900 gold reduced to just around a year on the $29 million. So it's looking to be a really good project and averaging 30,000 ounces of gold for the first 6 to 7 years at a cost of $600. So it could be a related cash generator for potentially McEwen Mining or an acquirer.

No. And I mean, especially if it can be done partially through debt financing, I mean that's -- that sounds like you've put some more work on that. I mean, certainly, that's a -- I would imagine, very attractive with the payback of the year. So anyway, I hope you can keep us updated on all of that.

Your next question comes from the line of [Mark Ellert with Alent U.S. IDC].

Rob, we spoke a few months ago, believe or not about the copper IPO. But a quick question. Since I work for International Data Corporation, our job is to really put names out there, and I think with your company. Do you have any ideas or plans to get more analysts or coverage on Wall Street? Because I think that would help with your visibility quite a bit.

Yes. Well, we wanted to move the copper project forward to a degree and then communicate with the Street. COVID was restricting that at first, but no, that's in the plan. Do you have ways to do that effectively?

Yes, we do, but that's a whole another conversation. I just wanted to see if you had plans, because I don't think a lot of big banks or Wall Streeters, there's not enough coverage, and I know that the future is bright with your company. So that was my purpose of the question.

Well, there is some work. We're working to update the preliminary economic assessment that was done in 2017. And included in that would be some of the results coming from the optimization work that's being done by an Australian company called Whittle Consulting. And they're envisioning through all the simulations they've done what appears would be larger and more profitable than what the PEA suggested. We want to fine-tune that and granted it's a preliminary economic assessment, but it shows that working at a $3 copper price, you can improve the economics by a considerable degree. And when you -- if you were to plug in today, price is up where it's a very attractive prospect.

Your next question comes from the line of [Jeffrey Ho], who is a shareholder.

I'd like your thoughts since the announcement of McEwen Copper, we've talked about this, that was, I believe, July 6, 2021. The price of McEwen Mining was $1.35. Since that announcement, has gone down on a black diamond slope to the price we see today. I'd like your thoughts on why the market and investors have given that a thumbs down. And secondly, you've traded the McEwen Copper, and you have stated in the past to show the value of McEwen Mining. Why not sell your gold and silver properties, because they're just not -- it seems like you're hemorrhaging money and just go with full force into the McEwen Copper. Also, can you give an update on the CFO's condition? And finally, what would be the delisting date from the New York Stock Exchange? I know those are like 3 questions to ask you, but anyway.

Well, let's start with the CFO. She had a stroke in December, mid-December, that led to a brain aneurysm and some brain surgery. She's been recovering well and expect to report back to work next week, on a part-time basis. And we're all very happy about that. We learned that when they went into the operating -- when she went into the operating theater, the doctors gave her a 30% chance of living. So it was very sudden and very sad. And we're delighted to see her recovering. She's an athletic individual, and that contributed to that recovery.

As a retired anesthesiologist, it's great to hear. My question was just because any time when the market or when the company reports CFO leaving or whatever, temporary leave, that always gives investors a sensible alarm. But anyway, that's good news.

With respect to selling gold, I mean our other assets and just concentrating on the copper, if you were to look at the potential of the assets that we hold, certainly, today, it would appear that the largest potential return and along this life asset would be losses and risk. And that's never escaped me. It's always been one of my favorite assets in our portfolio because of its size and its economic power once developed.

What was important, though, the -- we did a PEA some time ago and a number of majors looked at it, and there were some -- they said, well, there are a couple of things that we would have liked to have seen you done before to convince that this is a great deposit. And so they were looking at us and saying our finances were weak. We had this big deposit, let's put some low voltage in there and see what we can get it. Since then, copper price has gone from $2 to now better than $4.5. And we looked at, well, could we finance it by just financing McEwen Mining and I'm really not happy with the number of shares we have outstanding in McEwen Mining and John Tumazos was saying, "Well, let's buy some back." But we didn't have the financial strength to advance our gold and silver assets at the same time as advancing the copper. So I know some people have wondered, well, why didn't I just put the $40 million into McEwen?

Right, yes.

Well, and you look at it and say, we're going to have to issue a ton of shares. So I thought if we could advance -- and I didn't want to give you a ton of shares in McEwen. And so -- all right, if investors prefer a pure play over an amalgam of gold, copper and silver, let's create a separate company. And that, if we can get -- should create value once we get it fully financed for McEwen Mining and it retains a large interest, retains a royalty. The PEA suggests a 36-year life and copper is 50% higher than what it was. But the process was also remote.

Rob, with Los Azules, from day 1, I guess, how were you going to develop that originally, your plan, before you went into this McEwen Copper? You follow me on that? I mean what…

Yes, yes, yes. No, it's a good question. I looked at it, first, I thought, okay, we're supposed to have Gold Bar and it was going to be up and running. We had a positive cash flow, surplus cash flow that would allow us to develop. Gold Bar flew into a wall and we had to scramble for the last 2 years to try to repair the damage of a wrong geological model that sucked enormous amounts of cash out of our system. And took on debt believing in the projections on Gold Bar and said, "Well, I'd rather have debt and we can repay it." But in hindsight, it would have been better to do equity and not have that amount of debt on -- there's not a lot of debt, but it's certainly weighing heavily on the company right now.

Rob, so on those projections, who made those projections with Gold Bar. It's way off as apparently.

We used it from a firm, recognized geological consultants of SRK. And they looked at our resources, came up with a geological interpretation that our geologists compared with. And the year after we went into production and we weren't getting the grade or the tonnage that have been projected, they came back in and said, "Oh, the interpretation of the deposits is different." And rather than being laterally distributed, it's more concentrated vertically. And that wiped out a large part of the tonnage we had and the resources.

Is that a screwup on their part, then?

I won't put it exclusively on it. We have to say, we were party.

I see. Okay. Because you have -- wow.

No, that just slammed us in the head. And you spent all of 2020 and a large part of '21, trying to figure where'd the gold go? Is there more of it? And all of a sudden, it was like -- we looked at in a rather continuous ore body and what the reinterpretation said, it wasn't -- didn't extend the full distance. In fact, there's a big chunk right in the middle.

Okay. Because I'm kind of learning as I go too. I mean I've been investing with your company since 2016 when you had no debt, you paid a dividend. I mean it was only $0.01, but anyway. Well, do you still use that company then for projections or --?

It's an excellent question. I believe, in some cases, we do. There are different areas. They're international.

I see. Okay. And then about the delisting date, I mean, I hope you don't have to do that, and I hope you don't do a reverse split, because as I told you on my e-mails, I know they've been kind of harsh at times. I think that will be the last mail in the cost and I hope -- anyway. So what date do we look at where -- I mean, you have to get this price above $1.

You have to be above $1 for 30 days, trading days to avoid that happening.

Okay. So this depends on -- so from the date of the announcement, what's the cutoff date? And they say, well…

It's a 6-month period, Jeff. 6 months from the date of notice.

Okay. I'll figure that out.

It's into June.

Okay. But you're kind of so confident you can address that?

Sure as hell I'd try.

Yes. Okay. And I think that's it for me. Yes, yes, yes. We did get on that, of course, gold is down about $50 today. I think it's under 2,000. But I guess oil down, Iran's going to release some more oil. Rob, I think that's it. Get this puppy going.

That's right. Jeff, we just came back from -- as Michael said, came back from Argentina. There's a lot of excitement down there right now. And we'll be putting out a PEA, an updated PEA on the Los Azules project. When you start doing some of the math, it starts looking very interesting.

Okay. We've been hearing this for a long time from you, I know.

And there are no further questions at this time. Mr. Rob McEwen, I'll turn the call back over to you.

Thank you very much, operator. Thank you, everyone, for attending. As a friend of mine, Ted Rogers used to say, the best is yet to come. I know it's been a long way, but metal prices are moving in the direction that they're a function of the huge amount of liquidity that's been pumped into the system by governments around the world. The large levels of debt and low interest rates, and that's an environment in which hard assets appreciate the value and gold being one of the most valuable of those. But copper is also moving as we electrify the world. And I think we have the right assets. And the trends, despite bumps and hurdles we've had, the trend is lower production costs and opening of the margins, profit margins. So thank you very much for joining us today. Good bye. Thank you, operator.

This does end today's conference call. Thank you. You may now disconnect at this time.